Two hundred and eighty-nine percent. That was Argentina’s annualised inflation rate in April 2024, four months into Javier Milei’s presidency. The most libertarian head of government in Latin American history had just devalued the peso by 54% on his first day in office, eliminated half the cabinet ministries, fired 70,000 public sector workers, and was running the kind of economic experiment that Austrian economists write about and IMF staff read with clinical professional interest.
One year later, inflation was down to approximately 80% annually. Argentina had posted a primary fiscal surplus for the first time in 16 years. And real wages had fallen 20% in a country where they were already inadequate. Is the chainsaw working? That depends entirely on whose hands you’re counting — not whose ideology you’re scoring.
Javier Milei is not performing. He is a trained economist — a former economic consultant, professor, and television commentator who became a congressman before running for president. His intellectual framework is Austrian economics: Hayek, Mises, free markets as spontaneous order, the state as coercive apparatus. His political identity is “anarcho-capitalist,” which he defines as opposition to all coercive redistribution of income. He is not a Bolsonaro-style populist with libertarian aesthetics. He is an ideologically committed economic reformer who won a democratic election on the platform that Argentina’s economic catastrophe was caused by state expansion and could be solved by state contraction.
This distinction matters for investors because it shapes the probability that the programme continues past political headwinds. A performance-based politician abandons unpopular policies when approval ratings fall. An ideologically committed one interprets falling approval ratings as the cost of doing necessary things and stays the course. Milei’s approval ratings fell significantly in mid-2024 as real wages declined and poverty rates rose. He stayed the course. That ideological commitment is both the programme’s greatest strength (sustainability) and its greatest risk (inflexibility when tactical adjustment is needed).
The numbers behind the “chainsaw plan” deserve precise treatment rather than rhetorical shorthand. From 18 to 9 ministries: the merged and eliminated ministries included Education (merged into Human Capital), Labour, Social Development, Science and Technology (merged), Women, Gender and Diversity (eliminated), and Tourism (absorbed into Economy). Public sector employment fell by approximately 70,000 positions in Milei’s first year through a combination of non-renewal of contracts, voluntary retirement incentives, and outright position eliminations.
Public spending as a share of GDP fell from approximately 38% of GDP (INDEC data, 2023) to approximately 30% of GDP by end-2024. This is a structural compression, not a cyclical adjustment. The subsidy cuts were the most impactful single item: Argentina’s energy subsidy programme — which kept electricity and gas prices artificially below cost for decades — was progressively reduced. Energy prices for Argentine households and businesses rose 400–600% in 2024 as subsidy removal cascaded through the tariff structure. This was economically necessary (subsidies were consuming fiscal resources that caused the deficit) and politically brutal (households saw utility bills quintuple).
The fiscal arithmetic delivered the primary surplus the programme promised. Argentina’s primary fiscal balance — revenues minus expenditures, before interest payments on debt — swung from a deficit of approximately 2.9% of GDP in 2023 to a surplus of approximately 1.6% of GDP by end-2024. The first primary fiscal surplus in 16 years is a real number. It means Argentina stopped adding to its domestic debt pile for the first time since 2008. That’s the foundation of any meaningful economic stabilisation.
The 54% Day 1 devaluation was the necessary shock treatment for an exchange rate that had become economically fictional. Argentina’s official exchange rate before Milei was approximately 380 ARS/USD. The “blue dollar” parallel market rate was approximately 900 ARS/USD. These two rates coexisting meant that every transaction in Argentina involved an implicit question: which rate applies here? This created a two-tier economy that rewarded those with access to the official rate (typically, people with political connections) and punished those without (most Argentines).
By aligning the official rate toward market reality, Milei eliminated the arbitrage economy — but triggered an immediate price surge as goods priced at the artificial official rate repriced to reflect the true cost of imported inputs. Monthly inflation hit 25.5% in December 2023 (the month of devaluation). It remained elevated through Q1–Q2 2024 as energy price adjustments cascaded through the cost structure. By Q3 2024, monthly inflation was falling: 11% in July, 9% in August, 7% in September. By end-2025, annualised inflation was approximately 80% — still punishing by global standards, but a 70% reduction from the April 2024 peak.
The disinflation mechanism was conventional: fiscal surplus removes the money-printing pressure that caused chronic inflation in the first place. Argentina’s central bank had been printing pesos to finance government deficits for years. When the deficit disappeared, the monetisation pressure disappeared with it. The inflation decline is mechanically real, not manufactured by price controls or exchange rate manipulation. This is the most important single data point in the Milei economic experiment — the theory of disinflation through fiscal consolidation is working at the inflation level, even if the distributional consequences are severe.
The IMF’s $20B agreement with Argentina, approved in April 2024, represented the IMF’s largest-ever single-country disbursement as a share of quota. The terms were unusual by IMF standards: the Fund accepted a programme that required zero capital controls as a condition of disbursement — a direct response to Milei’s stated policy of free capital movement. Argentina’s previous IMF programme (2018–2022, $44B) had been structured with capital controls that proved economically distorting and politically untenable.
The 2024 programme’s capital account liberalisation condition aligned with Milei’s ideology but created tension with Argentina’s external debt service requirements. Argentina’s foreign currency reserves had fallen to dangerously low levels — net reserves were negative (total reserves minus swap line obligations) when Milei took office. The IMF disbursements, combined with a crawling-peg exchange rate regime that allowed the peso to depreciate gradually against the USD, were designed to rebuild the reserve position while avoiding another sharp devaluation.
By mid-2025, Argentina’s gross foreign exchange reserves had recovered to approximately $30B — still below the $45B reserve level the 2018 IMF programme targeted but substantially above the crisis-level lows of late 2023. The reserve recovery matters because it’s the mechanism through which Argentina can eventually remove remaining exchange rate controls and move toward the free capital account that Milei’s bimonetarism (ARS + USD coexisting freely) requires.
Here is the number that Milei’s supporters don’t lead with: real wages in Argentina fell approximately 20% in 2024 relative to 2023 levels, adjusted for inflation. This means the average Argentine worker’s purchasing power — what their salary can actually buy — declined by one-fifth in a single year. Against the backdrop of a population where more than 40% already lived below the official poverty line (INDEC data, Q2 2024), a 20% real wage decline means more Argentines moved into poverty, and those already in poverty moved deeper.
Argentina’s National Statistics Institute (INDEC) reported the poverty rate peaked at approximately 55% of the population in Q1 2024 — the highest level since the 2001–2002 crisis. By Q4 2024, as inflation deceleration began to outpace wage restraint, the poverty rate began declining: 49% by Q3 2024, approximately 42% by Q1 2025. The trajectory is the right direction. The absolute level is still a human catastrophe.
GDP contracted approximately 5.5% in 2024. This is the predictable recessionary consequence of fiscal consolidation: cutting government spending reduces aggregate demand, which reduces output, which reduces employment. The Milei programme anticipated this — the IMF programme’s GDP projections built in a 2024 contraction. Recovery began in Q3–Q4 2024, driven by agricultural exports (Argentina is the world’s largest soy flour exporter and third-largest soy bean exporter) and recovering private sector confidence. By 2025, GDP returned to positive growth: approximately 4–5% annualised by Q2 2025.
Argentina has one of the highest crypto adoption rates globally — Chainalysis’s 2024 index places it among the top five by raw adoption metrics. This is not speculation culture driving the numbers. It is monetary self-defence. When the official currency inflates at 289% annually and accessing USD at official rates requires connections or queuing in bureaucratic queues, USDT (Tether) on the Argentine P2P market becomes a rational savings instrument.
Milei’s economic liberalisation has, paradoxically, both helped and complicated crypto adoption. The parallel exchange rate premium — the “blue dollar” spread — narrowed significantly after the official devaluation, removing one of the primary economic incentives to use crypto for currency arbitrage. But the broader liberalisation of capital account regulations has made legal USD access easier, which is better for everyone and reduces the specific pain point that made crypto a necessity.
The structural stablecoin use remains. Argentine retail and SME operators using USDT for cross-border payments, savings, and invoicing will not switch back to ARS-denominated instruments until inflation is sustainably below 20% annually. At 80%, the use case for stablecoin savings persists. Binance, Lemon Cash, and other crypto platforms operating in Argentina have continued to grow user bases even as the macro stabilises, because the habit formed during crisis does not immediately reverse when the crisis conditions partially improve.
Argentina’s October 2025 midterm elections are the political stress test that the economic programme must survive. Milei’s La Libertad Avanza party needs to maintain congressional representation to avoid legislative opposition blocking his reform agenda. The economic conditions going into the election — inflation declining, GDP recovering, real wages improving from their 2024 trough, poverty rates falling from the peak — represent the best possible macro backdrop for an incumbent reform government’s electoral performance.
The opposition — Peronist blocs under various banners, the Kirchnerist left — will campaign on real wage losses, poverty rates, and utility bill increases. These are legitimate critiques of genuine policy costs. Whether Argentine voters prioritise the structural fiscal correction (the Milei argument: we stopped the money printing, we fixed the deficit, now growth can begin) or the distributional cost (the opposition argument: the poor paid for the rich man’s fiscal theory) is the question the election answers.
The 2025 midterms are the first real gauge of whether Milei’s political coalition — which won in November 2023 on anti-establishment anger and economic desperation — remains intact once the stabilisation costs have been felt by real households. If La Libertad Avanza performs well, the programme has a political runway through 2027. If it loses significantly, Milei loses the legislative capacity to continue the structural reform agenda and reverts to an executive-only reform capacity that is severely constrained.
Argentina’s sovereign bonds — restructured in 2020 and trading at distressed levels for most of Milei’s first year — have partially recovered. Argentine sovereign bond prices moved from approximately 35–40 cents on the dollar in late 2023 to 55–65 cents by mid-2025, as the fiscal surplus data and inflation deceleration provided the market with evidence that the programme has traction. Still distressed. Still high risk. But moving in the direction of stabilisation pricing.
Argentine equities — listed on the Merval index locally and accessible internationally through Global X MSCI Argentina ETF (ARGT) — have been among the best-performing EM equity markets in 2024–2025, rising from deeply depressed valuations as the macro stabilisation narrative strengthened. The problem with Argentine equity is always the same: performance in USD terms depends on whether the exchange rate stability holds, and exchange rate stability in Argentina has a shorter shelf life than most investors’ patience.
The Milei experiment is the most interesting natural experiment in EM economic policy running right now. It is testing, at scale, the proposition that genuine fiscal consolidation — not cosmetic austerity — can break an inflation spiral in a middle-income economy with deep structural dysfunction. If it works, it’s a template. If it doesn’t, it’s a cautionary tale.
The chainsaw is working on the deficit. What it cut along the way was the safety net that 55% of the population was holding onto. Whether growth eventually rebuilds what austerity destroyed is the question that Argentina won’t fully answer until 2027 at the earliest. The investors who bet on Milei in 2024 have already been right. The investors wondering whether to bet on Argentina now are asking a different question — not whether the crisis is over, but whether the recovery is durable.
Those are not the same question. And getting them confused is how people lose money in emerging markets.
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